Irrigation canals are proposed to be built in an arid region. The initial cost is estimated to be P2,500,000 with annual maintenance and operation cost of P48,000. For maximum efficiency, the canal will be dredged every 5 years at a cost of P50,000. Annual income from farmers and cooperatives who benefit from the project is expected to be P320,000. Assuming an annual interest rate of 9% and a 30-year planning horizon, detemine whether the project should ne undertaken.

Irrigation canals are proposed to be built in an arid region. The initial cost is estimated to be P2,500,000 with annual maintenance and operation cost of P48,000. For maximum efficiency, the canal will be dredged every 5 years at a cost of P50,000. Annual income from farmers and cooperatives who benefit from the project is expected to be P320,000. Assuming an annual interest rate of 9% and a 30-year planning horizon, detemine whether the project should ne undertaken.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Irrigation canals are proposed to be built in an arid region. The initial cost is estimated to be P2.5M with annual maintenance & operation cost of P48k. For maximum efficiency, the canal will be dredged every 5 years at a cost of P50k. Annual income from farmers & cooperatives who benefit from the project is expected to be P320k. Assuming an annual interest rate of 9% and a 30-year planning horizon, what is the computed ratio? a). 0.86 b).1.068 c).1.608 d). 0.68
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